Key Points
- A Record Weekly Close for the S&P 500
- Small Caps Reach Record Levels Then Fade
- The NASDAQ Composite Index Continues to Improve
- Yields Break Down at the Long End of the Curve
- Commodities Remain Strong Led by Energy
U.S. Equities
The S&P 500 closed last week at record levels, with Friday’s close at the top of the weekly range. The 10-week moving average remains a key metric, providing support to near-term pullbacks, and defining the bullish trend. From a longer-term perspective, the rising 40-week moving average would be the key level to watch should a deeper pullback take hold. Momentum continues to confirm the trend higher for equity prices, as the 14-week RSI has moved back above the 70 level. The path of least resistance remains to the upside for the index. Price-based support is in the area of the May lows, near 4,100.
The S&P Small Cap 600 Index briefly pushed to record levels last week before fading. The 10-week moving average is beginning to turn higher and should continue to provide support in the near-term. Price-based support is in the 1,250 – 1,300 range, while stronger support is around the 2018 highs, near 1,100. The 14-week RSI moved above the 70 level, confirming the bullish price trend.
Relative to the S&P 500, Small Caps are holding near-term support but remain below important resistance.
Within the Small Cap universe, the leading sectors on the week were:
- Health Care – consolidating above support.
- Utilities – in the process of breaking to a new high.
- Technology – improving, but still making lower highs and lower lows for now.
- Energy – traded to a new high last week.
The NASDAQ Composite Index has regained the rising 10-week moving average but remains in the consolidation that has marked trading since the beginning of February. In the short-term, support moves up to the 12,400 – 13,000 range. The 14-week RSI has held support and remains in a bullish regime. Odds favor a move to new highs for the NASDAQ on an absolute basis.
Relative to the S&P 500, the NASDAQ is holding support but remains in a downtrend.
U.S. Fixed Income
The 10-year yield moved decisively below the 50-day moving average last week and the moving average has turned lower. In the near-term, resistance moves down to the 1.70% – 1.75% range. At the same time, the 14-day RSI has broken support and is moving toward oversold levels.
It is hard to make the case that rates will continue to move higher until resistance is overcome. For now, the trend appears to be toward the downside.
While the short-end of the curve remains pinned near the lows, the long end of the curve is breaking down. thirty-year and twenty-year yields have both broken below near-term support. The five-year yield is also rolling over.
Global Equities
The Dow Jones Global World Stock Index (Excluding U.S.) closed the week above the rising 10-week moving average and at a new high. Price-based support remains in the area of the 2018 highs. The 14-week RSI has broken the short-term downtrend line and has room to overbought levels. Odds favor a continuation of the bullish trend.
Relative to the S&P 500, the Global Dow continues to build a base, but has not been able to gain much upside traction.
Commodities
The Bloomberg Commodity Index made another weekly closing high but finished off of the best levels of the week. The index remains above the rising 10-week moving average and the support zone defined by the 2018 highs. The 14-week RSI is in an overbought position and lends a momentum confirmation to the bullish price trend.
Within the commodity complex, Precious Metals continue to stall after a strong move from support. Industrial Metals are consolidating near the 2011 highs. Agriculture is under near-term pressure after a strong rally from the 2020 lows. Energy continues with the best short-term trend, moving higher after breaking resistance.
The U.S. Dollar
U.S. Dollar Index remains below the declining 10-week moving average but refuses to break below key support at the 2018 lows. Despite weakness in the Dollar Index, the 14-week RSI has not been able to reach oversold levels. As we have said in the past, this could be a sign that downside price momentum is waning. However, with the index stuck between support and the moving average, it is hard to be anything but neutral on the Dollar currently.
Take-Aways
Equity markets in the U.S. and globally are trading at/near record levels, trends that are likely to persist in the near-term. The breakdown in yields at the long end of the curve is the biggest development over the past week. Should weakness persist, there will be increased odds that growth areas of the equity market (such as the NASDAQ) will continue to work higher and could reestablish a leadership position.